[Music] thank you very much I'd like to begin with the key takeaway from our report which is that the world is at a record high level of globalization despite geopolitical conflicts and public policy headwinds now many of you are probably pretty skeptical about that conclusion how could globalization be at a record high when there's so much talk of Del globalization with some seeing a shift from International to domestic activity others seeing the global economy fracturing between rival geopolit
ical blocks and yet others seeing a geographic breakdown of globalization with a shift toward a more regionalized set of activity so what I would like to do over the next few minutes is to take you on a journey from the evidence supporting each of the these claims of deglobalization through some of what we learned over our research in the past year to the more upto-date and broader evidence that makes us confident that there has not at least yet been any meaningful Retreat from globalization and
after that I'll turn very briefly to some policy implications our latest country ranking and then to highlights on India's Global flows because we're launching this year's report here in India let's start with the possibility of a shift from International to domestic activity our analysis of the depth of globalization measures this based on 15 types of trade capital information and people flows if these trends go down that means there really is a shift from International to domestic activity on
the other hand if these trends go up that means we're seeing more activity Crossing National borders here's the global trade depth Trend up through 2020 the decline in the value of international trade relative to Global output after the 2008 Global financial crisis is what started a lot of the speculation about globalization going into reverse but when we update that Trend strong trade growth during the covid pandemic propelled this measure all the way back up to a record high level in 2022 and
it remained close to that level in 2023 and not only is trade as important to the world economy as it's ever been recent increases in companies investment commitments in foreign markets have also boosted the capital pillar of our index information flows are even more globalized than trade and capital flows with the largest increases over the past two decades although we haven't seen further growth in this part of the index in 2021 people flows are much less globalized and they were hit hardest
by the co pandemic but they're coming back strongly so none of our four types of flows shows a retreat International to domestic activity and so when we combine them into our overall globalization depth Trend you can see clearly that International flows are at a record high relative to domestic activity that high level though is still only 25% on a scale that runs from 0% which would mean that no flows cross borders at all all the way up to 100% which would mean that borders in distance don't ma
tter anymore the fact that we're still closer to 0% than 100% means there's still a great deal of potential for further growth furthermore the data on corporate globalization reinforced The View that the growth of global flows continues to advance publicly listed companies from the majority of countries are earning more of their sales revenue abroad than they did in 2019 and they're continuing to invest to keep growing internationally in 2023 the value of uh announced business expansion projects
in foreign countries relative to world GDP was at its highest level in more than a decade meanwhile the international share of m&a transactions continues to hold steady and so does the share of global output produced by companies outside of their home countries so on the question of De globalization via a shift from International to domestic activity we can say unequivocally that this has not begun to happen to the contrary the growth National flows is keeping Pace with or even exceeding the gr
owth of domestic activity turning to the possibility of a fracturing of the world economy along geopolitical lines we Analyze This in various ways in our report here I'll focus on the possibility of a split between rival blocks of Allied countries using a classification of close allies that was developed by Capital economics India is classified neither as a close Ally of China nor of the United States and so I'll come back to India's flows with these two groups of uh of of Allied countries towar
d the end of my presentation in Broad brushstrokes what we see is that countries at the center of present tensions do have geopolitically driven shifts in their flow patterns but the rest of the World generally does not direct ties between the US and China have diminished the share of us flows involving China and the share of China's flows involving the us both Fallen by about one quarter since 2016 and those declines are widespread across nearly every type of trade capital information and peopl
e flow nonetheless I wouldn't call that a decoupling between the US and China these two countries still connected by larger flows than almost every other pair of countries around the world in fact the only two countries without a common border that are connected by even larger flows than the US and China or the US and the UK so us China ties are diminished but they remain very very substantial in contrast the geopolitically driven shift that really does Merit the term decoupling is the profound
cut to Russia's ties with Europe and other Western Line economies since the full-scale invasion of Ukraine this has caused Russia's Global connectedness to plummet by a larger amount than we've ever seen before for a major economy as I mentioned though we still find no compelling evidence of a wider split between rival blocks of countries let's look at the evidence for that in the realm of trade because several recent Studies have argued that trade flows already show the first signs of a geopoli
tically driven frag mentation of the world economy here we're going to look at the ratio of trade happening between geopolitical blocks to to trade within blocks if this ratio goes down that would be indicative of fragmentation because less of the World's Trade would be Crossing between the blocks of countries the share of trade happening between blocks has declined since Russia's fullscale invasion of Ukraine that's absolutely true but it's not the whole whole story part of that was simply a re
versal of the opposite Trend during the covid pandemic and a very big part of that was because of the profound shift in Russia's flows that's taken place since the start of the full-scale invasion of Ukraine in fact if we exclude Russia from the analysis the share of trade happening between blocks has just gone back to its pre-pandemic level and if we exclude trade between the US and China this measure is basically back to where it was was before the start of the US China trade War so on the que
stion of the world economy fracturing along geopolitical lines while countries at the center of present tensions do have geopolitically driven changes in their flow patterns the rest of the world at least yet uh is not showing signs of a fracturing between rival blocks most countries have not cut their ties with their traditional flow Partners moving on to the possibility of a from globalization to regionalization there is currently a high level of interest in shortening Supply chains in many co
untries which could lead to more regionalized trade but what our research pushes back against is the idea that there is already a trend toward more regionalized trade patterns underway what started many people uh believing that trade was becoming more regionalized was a decline in the share of trade happening between regions that started in 2012 and started got a lot of attention in 2018 and 2019 as trade tensions were escalating but that Trend wasn't actually very big in historical context and
it didn't continue past 2016 and the fact that trade has tended to happen over longer distances the opposite of what one would expect it was becoming more regionalized reinforces the conclusion that globalization has not begun to give way to regionalization In fact when we dig deeper into the data we find that only North America shows a clear sustained pattern of more uh trade happening within the region and when we look Beyond trade we find that most other kinds of flows are continuing to stret
ch out over longer distances with no signs of them becoming more Regional so on the question of a turn from globalization to regionalization this is clearly not happened at least through 2023 we might see it in the future major supply chain reconfigurations can take time to uh execute but I wouldn't bet on a big shift from globalization to regionalization particularly in trade because trade is already highly regionalized and further increases in regionalization usually come with some pretty impo
rtant uh tradeoffs so looking across all three Del globalization scenarios the evidence supporting Del globalization is much less compelling than the evidence against it deglobalization is still a risk not a current reality now having argued that deglobalization has not begun to happen I think it's important to pause on the implications of that for Public Policy debates the policy environment has become less conducive to globalization with increases in trade barriers more screening of foreign in
vestments a proliferation of data flow restrictions and perhaps most importantly a level of geopolitically driven uncertainty that can make it harder to commit to International opportunities the resilience of international flows that we've seen so far does not mean that we can disregard the threats to globalization because history shows that globalization can go into reverse and recent studies indicate that de globalization would come at a substantial cost so it's natural that many institutions
are warning against deglobalization but a lopsided Focus only on the threats to globalization risks making de globalization a self-fulfilling prophecy I think the director general of the WTO made this point beautifully in recent remarks she affirmed that Del globalization is not happening but there there but there's a lot of rhetoric about deglobalization which feeds into the political tensions and the policymaking and that that kind of rhetoric can contribute to De Global to making de globaliza
tion a reality in other words deglobalization could be a self-fulfilling prophecy because if decision makers become convinced that the world is De globalizing and there's nothing that they can do about it it would be a natural response to focus more on boosting National self-sufficiency that's why it is essential to maintain a balanced perspective recognizing that Global flows have proven highly resilient despite significant policy headwinds so it still makes sense for countries to work together
to preserve and to expand the benefits of global ation and on that note let's turn to our country level results which reinforce the conclusion that globalization has not gone into reverse in 2022 143 countries became more globally connected while only 38 became less connected our overall Global connectedness ranking uniquely reflects both how large countries International flows are relative to their domestic activity and how broadly their flows are spread out around the world the top ranked cou
ntry in this Edition this edition of our report is Singapore which ranked first on the depth dimension of the index with the largest International flows relative to its domestic activity Singapore's small size is an advantage for its Global connectedness small countries naturally have more of their flows happening internationally than larger countries with their big uh internal markets but Singapore's flows are even larger than one would predict based on Singapore's size level of econ Economic D
evelopment and other characteristics the Netherlands came in second this year followed by Ireland Luxembourg Malta Switzerland Belgium the United Arab Emirates which is the top ranked emerging economy the United Kingdom which rank ninth overall and first on the breath part of our index it has the most globally distributed flows of any country and the Hong Kong special administrative region of China rounds out our top 10 list seven of the top 10 economies are in Europe which ranks as the world's
most globally connected region and here putting countries up through 25 onto the map we see more major European economies along with Qatar and Bahrain going up through rank 50 Korea came in 34th the United States 44th and Japan 50th turkey came in 51st and India 62nd I'll come back in just a moment to India China ranked 80th and Russia 91st and here are the countries up through 125 5 150 and the full 181 countries that are ranked in this edition of the report before I conclude since we're launch
ing this year's report in India I'd like to highlight a few aspects of the results for India India's current level of globalization is consistent with what our models predict given the country's large size and other structural characteristics and India has especially high potential uh to move up uh in its globalization level moving forward due to its standing as the world's fastest growing major economy there's a strong positive link between Global connectedness and economic development I think
the most striking detail in the India data is a surge in the value of announced investments in India by Foreign companies in 2023 India attracted more announced Greenfield FDI than every other country except the United States and a rising share of that investment is going to manufacturing India's exports and imports have increased notably as a share of India's GDP over the past two years and India is now ahead of China on both of those measures of integration into International markets via trade
regarding India's flows with the two blocks of uh of Allied countries that I spoke about earlier India maintains a flexible position with substantial ties to both blocks the chart on the left shows that India's overall trade capital information and people flows uh are larger with the uh us aligned block and the chart in the middle uh shows that that's also true for India's merchandise exports although there you also can see a rising Trend in the share with the US align block uh India's Imports
the chart on the right though show a different story with uh the origins of India's Imports split roughly equally uh between the two blocks finally I'd like to highlight how India is moving up in the ranks of the largest participants in different types of international flows this should continue as India's rapid economic development advances placing India in an increasingly Central role in shaping the future of globalization with that I will wrap up to summarize globalization has not gone into r
everse instead Global connectedness hit a new record high in 2022 and remain close to that level in 2023 the growth of trade capital information and people flows strongly rebuts the notion that we've entered a period of De globalization geopolitically drift geopolitically driven shifts and flow patterns are still mainly limited to the countries at the center of present conflicts most countries are not cutting ties with their traditional partners and there is still no General pattern of more flow
s happening within as compared to between regions although trade regionalization has increased specifically in North America Singapore is the world's most globally connected economy and Europe the most connected region thank you very much [Music]
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